Q&As

A UK-domiciled testator created a discretionary trust in their Will. The trustees are all non-UK resident. Is it possible for the trustees of the discretionary Will trust wish to make an appointment of trust property under section 144 of the Inheritance Tax Act 1984 to create a disabled person’s interest for a UK-resident individual?

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Published on LexisPSL on 26/04/2019

The following Private Client Q&A provides comprehensive and up to date legal information covering:

  • A UK-domiciled testator created a discretionary trust in their Will. The trustees are all non-UK resident. Is it possible for the trustees of the discretionary Will trust wish to make an appointment of trust property under section 144 of the Inheritance Tax Act 1984 to create a disabled person’s interest for a UK-resident individual?
  • IHTA 1984, s 144
  • Disabled person’s trust
  • Other taxes
  • Taxation of non-resident trusts-income tax and CGT
  • Taxation of disposals of UK property after 5 April 2019

In broad terms, section 144 of the Inheritance Tax Act 1984 (IHTA 1984) confers relief from inheritance tax where property comprised in a person's estate is settled by their Will on discretionary trusts and within the period of two years after their death there is a distribution out of the settled property.

IHTA 1984, s 144

Relief under IHTA 1984, s 144 is subject to the following conditions:

  1. property comprised in the deceased's estate must be settled by Will. For this purpose, the property comprised in the deceased's estate falls to be determined in accordance with IHTA 1984, s 5 without the modifications which apply for the purpose of IHTA 1984, s 142

  2. property must cease to be relevant property. IHTA 1984, s 144 applies in relation to any event which (apart from that section) would give rise to an 'exit' charge under IHTA 1984, s 65

  3. the distribution must take place within two years of death. Like the two-year time limit for the purpose of IHTA 1984, s 142, this is a rigid time limit and HMRC have no express statutory discretion to extend it

  4. no intervening immediate post-death interest or disabled person's interest. For deaths on or after 22 March 2006, IHTA 1984, s 144 does not apply where an immediate post-death interest (IHTA 1984, s 49A) or disabled person's interest (IHTA 1984, s

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